Credit Ratings

Alberta’s credit rating has been under pressure since before the NDP were elected in May 2015. While rating actions did not occur until later in 2015, provincial finances had been deteriorating since the financial crisis in 2007-08. Although oil prices recovered after the financial crisis, rising capital and operating expenditures, combined with a huge drop in royalty revenue, have considerably weakened the province’s financial flexibility.

In the most recent report, Moodys downgraded the province from Aaa to Aa1 because of ” the province’s growing and unconstrained debt burden, extended timeframe back to balance, weakened liquidity, and risks surrounding the success of the province’s medium-term fiscal plan given the outlook for subdued growth.” The report came just four days after the provincial budget was tabled. Moody’s also expressed concerns about Alberta’s biggest financial agency, Alberta Treasury Branches. The agency noted: “the provincial guarantee of ATB Financial’s obligations may pose additional stress on the province’s level of cash and investments. ATB’s gross impaired loans doubled year-over-year to 1.1% of total loans at December 2015, reflecting some deterioration in ATB’s exploration and development loan portfolio. This may result in the need for increased capitalization of ATB.”

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About albertarecessionwatch

Former Director, Institute for Public Economics, University of Alberta and currently Fellow of the Institute. Former executive with Alberta Treasury Branches. Worked for the Alberta government for 12 years with Federal and Intergovernmental Affairs and Alberta Treasury. Areas of focus: financial institutions legislation and policy, government borrowing, and relations with credit rating agencies. Ph.D in Political Science (Uof A), Masters of Public Administration and BComm. (Carleton University). Author of Politics and Public Debt: The Dominion, the Banks and Alberta's Social Credit. Presently working on study of Alberta provincial agency board appointments.